Earlier this month, Red Sky announced it would acquire a 100% interest in the Killanoola oil project in production license PRL13 from Beach Energy for an undisclosed price.
The company completed a capital raise of $4 million to buy the field.
The Killanoola oil project is located about 25 kilometres northwest of the Katnook Gas Fields in the onshore Otway Basin.
On Thursday, Red Sky outlined its interest in the Killanoola field, noting that while the deal had not yet closed, it was excited by the level of prospective resources.
On a 2C contingent resource basis, Red Sky believes the field holds around 2.8 million barrels of crude. However, on a best estimate 3C basis Red Sky believes the Killanoola could hold almost double that, roughly 5.4MMbbls.
Both estimates are conventional resources, and do not include potential unconventional prospectivity. Red Sky is yet to complete a formal evaluation of unconventional prospects.
Based on a 2C case Red Sky would look to produce from three wells within the license.
If the high estimate 3C basis is closer, the company could produce from as many as six wells.
Red Sky is looking to convert these resource estimates into reserves but will need to wait until its acquisition from Beach is completed.
The Killanoola oil field was discovered back in 1998 when the Killanoola-1 discovery well hit commercial quantities of crude at a depth of 858 metres. It was flowtested at about 300 barrels of oil per day.
In 2011 a second well, Killanoola-2 was drilled in the southeast of the permit which also hit oil. It was not brought into production or flow tested, however.
Red Sky's plans going forward will be to re-start the Killanoola-1 well and resume oil production "as soon as possible" using existing infrastructure. Company chief executive Andrew Knox said in November the field would provide "clear near-term production".
It will then look to carry out 3D seismic across the field and from that create a field development plan.
The Killanoola oil field has been owned by several smallcaps including Rawson Resources which bought the field back in 2014. However it was never properly commercialised and upside potential from the southeast of the block was never explored.
Lakes Oil took over Rawson to give it access to the same formation in the South Australian section of the onshore Otway it had been chasing in Victoria until exploration moratoria halted work.
Prior to Rawson buying the field, a company called Essential Petroleum Resources held it, following an acquisition of the field from Origin Energy. Essential Petroleum's resource estimate was higher than Red Sky's at about 7MMbbls.
Red Sky Energy's share price was 0.2 cents giving the company a market cap of $4.09 million.